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Bulgaria, IMF Deal to Come with Stigma Attached

Date: 09.06.2009

Politicians, who call for an urgent deal with the International Monetary Fund, should not forget that if a healthy country asks IMF for help, then the market decides that the condition of the country is much worse than they thought before.

This is the opinion of Georgi Angelov, senior economist with the Open Society Institute Sofia, who spoke in an interview for Novinite.com.

Angelov was approached to comment the call of the opposition rightist GERB party, tipped to win a July 5 parliamentary election, for an urgent deal with the International Monetary Fund (IMF).

He conceded that it might be easier for a government to do the necessary reforms with some push from IMF, but stressed that "it is always better for a government to do the reforms by itself".

"The problem is that when a country followed imprudent policies, it loses credibility and markets are more suspicious. After that, it is too difficult to rebuild that credibility again, even with IMF help," Anguelov said.

GERB, which according to all opinion polls is likely to win most votes but not an outright majority in July, said they will immediately sign an agreement with the IMF to stand as a guarantee for the country's financial stability if they come to office.

They said they would seek to start immediate talks with the IMF and not for a precautionary, but for a stand-by agreement.

Bulgaria has already entered recession with its economy shrinking 5% from January to March and contracting 1.6% in the fourth quarter on a quarterly basis.

Bulgaria's gross domestic product (GDP) contracted by 3,5% in the first quarter of 2009 on an annual basis, the first time that the country's GDP marked a year-on-year since the financial and economic crisis in 1997.

Bulgaria currently operates in currency board regime and the lev is pegged to the euro.

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